Introduction
As per 1 January 2012 the safe harbour to qualify as professional market party ("PMP") within the meaning of the Act on the financial supervision (Wet op het financieel toezicht, "AFS"), has been increased from EUR 50,000 to EUR 100,000. This safe harbour amount is equal to the new safe harbour amounts which apply as per 1 January as exceptions to the licence requirements for offering units in investment institutions and investment objects. They are also in line with the Prospectus Directive Amendment which takes EUR 100,000 as safe harbour exception to the prospectus requirement in relation to an offer of securities to the public.
Practical finance relevance
In the Netherlands it is prohibited to pursue the business of a bank without a banking licence. It is also prohibited to otherwise in the conduct of business or profession borrow money. In this context the AFS uses the term "repayable funds", which should be construed broadly. Deposits, loans, bonds, notes and other types of debt claims qualify as such. A debtor is excepted from the above two prohitions if the repayable funds are attracted from a creditor who can be qualified as a PMP and that is why the definition of PMP is relevant.
PMP, safe harbour
A governmental decree based on the AFS defines a category of PMPs by means of a safe harbour amount. Before 1 January 2012 any party who at least lent EUR 50,000 at once qualified as a PMP in relation to the debtor. This safe harbour amount was increased as per 1 January 2012 to EUR 100,000. If the PMP is a consumer, however, the Netherlands laws transposing the EU Unfair Commercial Practices Directive (UCP) will apply, regardless of the safe harbour.
Transfer restrictions and wild west prospectus legend
An assignee or transferee of a PMP does not automatically qualify as a PMP as well. For this reason it is customary in finance practice to include transfer restrictions in the documentation. This should prevent that debt will be traded or transferred in denominations below the safe harbour, which could cause the debtor to violate the AFS. It should be noted, however, that the transfer restriction cannot prevent applicability of the UCP.
In addition, if monies are borrowed by means of the issue of securities, such as notes, a prospectus legend may need to be included in all offering materials in the form of an image and text (the so-called wild west sign). This should warn prospective investors that there is no approved prospectus. The obligation to use the wild west sign does not apply in relation to qualified investors. For more information on wild west signs please see our update of 5 July 2011.
Practical consequences
Parties seeking reliance on the safe harbour to prevent that they borrow from parties other than PMPs will as per 1 January 2012 need to increase the safe harbour amount (also in relation to transfer restrictions) to at least EUR 100,000. Additionally, if they borrow by issuing securities they should in some cases include a wild west sign in offering materials.
Transitional law
Those who qualify as PMPs before 1 January 2012 in relation to a debt claim because of the safe harbour of EUR 50,000 which was applicable at the time will in relation to that certain debt claim not lose this status because of the increase of the safe harbour amount. However, this only applies in relation to debt claims arising out of agreements entered into before 1 January 2012. A lender under an agreement entered into on or after that date will need to at least lend EUR 100,000 at once to qualify as PMP on the basis of the safe harbour.
